In the 1998 conspiracy thriller Enemy of the State starring Will Smith and Gene Hackman, Smith plays an innocent lawyer being chased by rogue government agents using the latest in surveillance technology.

He discovers that "it's not paranoia if they are really after you" and that it can be difficult to escape his pursuers' satellite-based watching eye.

For Oliver Vellacott, founder of Edinburgh-based CCTV surveillance company Indigovision Group, films like Enemy of the State present both a vision of the potential of surveillance technology and its limitations.

"While watching the film I was working out in my mind the amount of storage involved," says Vellacott.

"I thought to myself - 'impossible' Then I realised I was a bit sad..."

Vellacott's company, Indigovision, designs and manufactures hi-tech CCTV systems. What Indigovision brings to the market is a video surveillance system delivered over internet protocol (IP).

Current CCTV systems are still predominantly analogue - requiring expensive hard cabling not to mention warehouses full of carefully filed tapes or DVDs.

In contrast, Indigovision systems can automatically store thousands of hours of recorded material - no need to change tapes. As the cameras and software are connected on an IP network, it is as effective running 100 cameras as it is running 1000 - as well as more robust.

The software also provides the latest in analytics, which allows video watchers to search for clues or for cameras to detect suspicious actions.

The time and money saved in addition to the extra functionality makes the product clearly superior. Vellacott likens the difference between the two kinds of systems as that between walkie-talkies and mobile phones.

"Walkie-talkies basically did the thing - they allowed people to speak from one place to another but the distance was limited and it was basically point to point. It is very similar situation when you compare analogue CCTV to IP video.

"There is very little question it will all convert to IP in due course, the question is just when," says Vellacott.

Indigovision's technology seems to have been on the verge of going big ever since it floated on AM in 2000, raising s35m. Its technology was always hugely promising.

The company came to prominence in a time noted for its "irrational exuberance" when it came to firms that did anything over the internet. But when the dotcom party ended, so too did Indigovision's fortunes. In 2003 its share price plummeted. In order to survive the firm had to give back half of money it raised to shareholders and to adapt.

The first thing to go was the company's distribution model. Initially they were licensing the product to CCTV manufacturers who preferred to sit on the technology.

"We couldn't make that work," recalls Vellacott.

"It seemed like it was going really well because people were buying licences and developing products, but the royalties just didn't come through.

"It was never really going to work. Those were the guys who were going to lose the most from the move to IP as those were the guys who had the cash cows in analogue.

"But hindsight is a wonderful thing. The big shift in 2003 was becoming a product company. In that one move that is when we got control of our business. We are now so much closer to the end user, we know what they want."

Now they design and manufacture the kit themselves, from the cameras to the servers. Their systems are used all over the world in airports, public transport systems as well as the 2004 Olympics and the 2006 World Cup.

Currently one of the hottest markets for Indigovision is post 9/11 US, where they are making breakthroughs into university campuses and casinos.

Previous to this, Americans were much more wary of 'Big Brother' and defending their civil liberties from the prying eyes of the authorities than the British. Years of terrorism and the use of CCTV in solving the Jill Dando and Jamie Bulger killings have made the UK much more accepting - thus making the UK the most advanced CCTV nation in the world.

"It does impinge on civil liberties," admits Vellacott.

"And yet, would you rather be mugged? It does improve safety as well.

"It pulls people in two directions. But it is never going to go away. I think America was much more concerned about civil liberties - until 9/11. The difference here is we have had the IRA and the City of London bombings. That is why the city has cameras everywhere.

"Why do we accept that in the UK? Because we lived with terrorism for years. Even countries like Germany and Scandinavia, are some way behind us in acceptance of CCTV as a good thing. But it is starting to change there.

"It is Big Brotherish. But it is like any technology.It can be used for good and bad. The technology itself is just technology."

But Velacott does not promote myths about how clever CCTV can be. In an increasingly technological world of biometric identification, the line between science and fiction is often blurred.

He rubbishes the notion of reliable facial recognition technology, for example.

"A lot of it is rubbish. It can't be done," says Velacott.

"Cctv that can pull faces out of a crowd is a myth.

"There's a lots of people who say CCTV cameras can detect suspicious movement - someone is about to attack someone or they can detect pickpockets. Can you detect a pickpocket on the street? The whole point is it is done with sleight of hand so the camera can't catch that.

"However, there are certain things that can be done.

Today we do the stuff we can do reliably. We track people, we count people going through doors, we can detect tailgating - someone trying go through a door behind someone else. Simple things you can do well."

Vellacott formed the company in 1994 after graduating with a PhD in electrical engineering from Edinburgh University. At the time he was working for one of Scotland's most successful spin-outs. Vision Group was founded by Professor Peter Denyer to exploit a technology that is now used in every mobile phone camera and videophone. That was when inspiration struck.

"I looked at these things thinking 'they are so cheap, you could stick them everywhere'," says Vellacott.

"There were only two things missing. One, there was no way of getting the video back, which was where the IP comes from. The other is that there is no point having millions of cameras if you don't have people looking at them. That is where the analytics came from."

He denies, however, that this was a eureka moment. "It was an idea. The hard bit is making it into reality," he says.

"We've made a good start making it to reality. We are still a small company but we are growing well and doing it from a good foundation."

Years of terrorism have made the UK the most advanced CCTV nation in the world'